Built on bias

THE Bharatiya Janata Party-led National Democratic Alliance government made some major policy announcements in the area of healthcare and drug prices this year. The National Health Policy (NHP) 2017, assuring universal healthcare, was unveiled in March, and in April the government declared its intention to promote generic drugs as opposed to branded drugs. These interventions roughly coincided with the imposition of caps on the prices of cardiac stents and orthopaedic knee implants, both of which were implemented by the National Pharmaceutical Pricing Authority (NPPA). In April, Prime Minister Narendra Modi announced at a meeting in Surat that doctors should only prescribe generic drugs. This, he said, would alleviate the huge burden of health expenditure on people. Soon, the nodal body, the Department of Pharmaceuticals (DoP) under the Ministry of Chemicals and Fertilizers, began assiduously expanding the number of Jan Aushadhi outlets, irrespective of the fact whether the drugs were available there or not ( Frontline , August 4).

It was now evident that the government was thinking about a comprehensive pharmaceutical policy given the implications of the National Health Policy, 2017. A draft pharmaceutical policy, not yet in the public domain but under limited circulation, outlines the broad contours of what the government has in mind. The draft, a copy of which is available with Frontline , was discussed at a closed-door national consultation on August 30. Explaining the reason for a new policy, the draft says the National Pharmaceutical Pricing Policy (NPPP), 2012, had envisaged that the DoP would take steps “to initiate a holistic policy on the pharmaceutical sector in due course”.

It says: “It is high time, therefore, for formulation of a comprehensive pharmaceutical policy to guide and nurture the pharmaceutical industry to enable it to maintain and enhance its global competitive edge in quality and prices”. The reason for this vision was not concern for affordable healthcare but the industry’s worries, namely declining compound annual growth rates, non-adherence to quality standards and norms, growing competition from other countries, reducing the dependence on imports of key raw materials and active pharmaceutical ingredients (APIs), and increasing indigenous discovery of new molecules. The NPPP 2012 had recommended a law for the pharmaceutical sector but curiously this does not find mention in the draft policy.

Ease of doing business

The draft policy, which has come under criticism by public health experts, dwells lightly on the regulatory aspects of the industry given the problem of drug pricing and unethical marketing practices. To date, there is no statutory framework or legislation to check unethical marketing practices by pharmaceutical companies. The emphasis continues to be on self-regulation. The draft talks about self-reliance in manufacturing, quality control of indigenously manufactured drugs, shortage of Nationally Accredited Laboratories, problems of perfunctory inspection of manufacturing premises and processes, non-compliance with World Health Organisation criteria for good manufacturing practices (GMP) or good laboratory practices (GLP), but does not lay down a concrete road map to achieve self-reliance.

In the same breath, it laments that approvals for new drugs take a long time, stating that it was contrary to the concept of “ease of doing business”; that the extent of R&D used by indigenous manufacturers is limited to new processes and there was a disproportionate focus on generic formulations where tough competition has already emerged; and that the competitive advantage was being undermined by the takeover of Indian companies by foreign companies, though ever since foreign direct investment in the pharmaceutical sector was liberalised investment in only one greenfield project had been received while the rest were in brownfield projects. It also talks about making quality drugs accessible at affordable prices and raises concerns of varying mark-ups for the same salt used. There were about 2,500 pharmacopeial salts while there were over 60,000 brand names with varying prices, it observed.

It also raised concerns about unethical marketing practices whereby doctors were lured to recommend particular brands with incentives such as sponsoring them on educational conventions, a phenomenon that Frontline had reported (see “Faulty prescriptions”, May 3, 2016).

The policy draft states that the pharmaceutical industry, essentially a “private enterprise-driven industry” with a negligible contribution of public sector undertakings (PSUs), was largely fuelled by exports and is India’s third largest foreign exchange earner. Quoting the Centre for Monitoring the Indian Economy, the draft policy says the growth rate of the industry had come down from 14.36 per cent in 2010-11 to 8.68 per cent in 2014-15.

The first drug policy was formulated in 1978 following the recommendations of the Hathi Committee (1975), which underscored the need for self-sufficiency and availability of essential medicines at reasonable prices. It had delineated the role of the public sector vis-a-vis the private sector. The background given by the draft also mentions how between 1954 and 1966, the country was self-sufficient in the manufacture of intermediates—APIs and key starting materials for drug manufacturing. “The PSUs were laying a strong foundation and playing an important role in this. The DPCO 1966 had put all 18 APIs under price control,” the note said.

Despite the accolades to the PSUs, the note literally sounds the death knell for the pharma PSUs by stating that “the PSUs in the pharmaceutical sector have served their purpose. The robust formulation industry that has spawned and captured world’s imagination is on the solders [sic] of the giant PSUs that gave the initial push in material manufacturing as well as provided the manpower in the initial phases. Today however, their utility is very limited.... The indigenous private industry is by now healthy and robust, very competitive and fully capable to meet the societal and governmental needs.”

Despite a healthy and robust private pharmaceutical industry, the document laments that from 1996, globalisation changed everything as manufacturers began looking towards cheaper APIs, which could be imported now. The indigenous APIs and intermediaries, though better in terms of quality, were not price-competitive. Over the years, the competitiveness and capability to manufacture APIs went down. The draft claimed that it aimed to correct the dependence on imported APIs and KSMs and restore indigenous capabilities to manufacture them.

As reported by Frontline (“Perilous prescription”, February 3, 2017), the Cabinet had decided to do away with the pharma PSUs, including profit-making ones such as Rajasthan Drugs and Pharmaceuticals Limited. The draft policy, however, draws attention to the concerns of the pharmaceutical industry about compulsory licensing and the government’s moves to control prices of patented medicines. It talks about mega bulk drug parks, which State governments would be encouraged to set up in a PPP mode; for quality control, it says bioavailability and bioequivalence tests would be made mandatory for all drug manufacturers but it suggests self-certification as an option until renewals are done for existing licensees and also for manufacturing units until the Central drug regulator developed the capacity for annual inspections.

It recommends procurement for the National Health Mission from WHO GMP and GLP adopted units only; yet it liberalises the approval process of drugs by the Central or State drug regulator. The draft policy recommends public procurement of generic drugs in their salt names, which has been welcomed by public health activists. It also says that trade margins will be prescribed after stakeholder consultations.

Health Ministry ‘srole diminished

The draft policy admits that 65 per cent of medical costs are on drugs, which are mainly out-of-pocket expenses. As a remedy, it recommends that the list of medicines be prepared by the Department of Pharmaceuticals (the National List of Essential Medicines, or NLEM, is basically prepared under the aegis of the Ministry of Health and of Family Welfare) and the NPPA fix the price ceilings. The objective does not appear to be price control but ease of doing business as it suggests that “for ensuring accessibility and affordability of drugs, ease of doing business and more coordinated synergies, all the regulators, commissions pertaining to pharmaceutical industries/sector would be brought under the ambit of one department”.

It talks about strengthening the NPPA, which would be assisted by an advisory body for pricing nominated by the government and the advice would be recommendatory. Prices fixed by the NPPA will not be revised unless directed specifically by the government or any higher court. The Drugs (Prices Control) Orders (DPCOs), implemented by the NPPA, will contain only “off patent” medicines in its schedule; in patent medicines will not be subjected to price ceilings by the NPPA. “They would be regulated by compulsory licensing under the Patents Act or through emergency powers under para 19 of the DPCO, that too, only when expressly directed by the government in the Department of Pharmaceuticals to do so.” It lists out “interventions” in 11 paragraphs, which indicate that “this policy would significantly contribute to the ease of doing business in the pharmaceutical sector”.

Price control regime

It was learnt that the NPPA, which presented its views at a national consultation on the draft policy on August 30 and agreed with some of the policy prescriptions, felt that the draft did not explore affordability options. The linkage with NHP 2017, it stated in its presentation, was necessary to provide affordable healthcare; there was a need for an affordable healthcare Act; a need to differentiate between new drugs and tweaked scheduled drugs. The exemption to indigenously produced APIs and intermediaries from price control for five years would take a large number of NLEM drugs out of price control; and there was no mechanism suggested to check levels of indigenisation. All dosage forms and strengths of NLEM medicines, including essential medicines, should be brought under price control; the NPPA should be empowered to bring additional drugs under price control based on volumes, trade margins and doctors’ preferences and that it should have flexibility in pricing methodology. The government, it held, should not be the reviewing authority and an independent appellate authority should be made; the NPPA had an expert committee and that an advisory body in the DoP did not sound “logical”; it would dilute the NPPA, cause additional financial burden and delay decision-making processes; the NPPA should also be allowed to revise its decisions if there was a data error.

Irrational formulations

In fact, the draft policy glosses over the fact that the NHP 1983, had pointed out how drugs were not sufficient to ensure healthcare but the use of “rational” drugs was. It, therefore, held that the “Indian pharmaceutical industry had a vital role in serving the basic health needs of the people”. The subsequent promulgation of the historic DPCO, 1966, which was brought under the Essential Commodities Act, 1955, saw the simultaneous expansion of the industry, including those producing API with the help of the pharma PSUs that had been around since 1954.

The Patent Act of 1970 further provided for process patent rather than product patent, which gave the necessary impetus to the industry. The drug policy was revised in 1986 and 1994, which saw a radical shift. The 1990s saw neoliberal economic policies, which had an effect on the overall health and drug policy sectors. The number of drugs manufactured by PSUs was limited to five; foreign investment limits were raised to 51 per cent; new drugs were exempted from price control for 10 years and price fixation and revision was entrusted to the NPPA. Quality control was under the mandate of the Ministry of Health and Family Welfare. In 2002, the pharmaceutical policy had a major ideological shift—from being a “controlled regime” to a “monitoring regime”, the span of price control over drugs and pharmaceuticals was reduced substantially, and apparently it was in the name of catering to the interests of the weaker sections that the government arrogated to itself the right to monitor rather than control. In 2005, the Patent Act was revised to provide for product patents. In 2012, the pricing policy came into place while the NLEM was kept under the domain of the Ministry.

S. Srinivasan, founder of Low Cost Standard Therapeutics, a Vadodara-based public, non-profit charitable trust, told Frontline that all pharmaceutical policies in India needed to be assessed from the point of view of these factors: whether such policies would lead to increased affordability and availability of all essential and life-saving medicines; whether it would ensure self-reliance of the API sector in India ; whether it would ensure that only rational medicines are available as part of free health for all; whether it would use Trade-related Aspects of Intellectual Property Rights (TRIPS) flexibilities, reinforce Section 3d to avoid evergreening and frivolous patenting or use compulsory licensing measures to promote competition in patented medicines and shut the door on all TRIPS Plus clauses in Foreign Trade Agreements such as data exclusivity, patent term extensions, and investor state dispute mechanisms.

“The policy stumbles on all these yardsticks. In clever and not so clever phraseology, it tries to bury NPPA, DPCO and price control measures. And also in the process goes against Supreme Court directives to put essential drugs under price control. There is no discussion of promoting rational drugs and getting rid of irrational fixed drug combinations [FDCs]. The market for 344 FDCs is only about Rs.3,000 crore, whereas the market for all irrational FDCs is in the range of Rs.25,000 crore,” he said. The policy, he said, talked about compulsory licensing half-heartedly without a road map. He said: “The policy drafters do not seem to be sanguine about the dangers of TRIPS Plus measures being discussed in regional comprehensive economic partnerships negotiations and other Free Trade Agreements. Its idea of quality promotion is naive and is built around introducing WHO GMP and bioavailability/bioequivalence measures.”

The policy, said Srinivasan, got a few things right—price control on all strengths and dosage forms of a drug, aimed to control trade margins and unethical drug promotion. The “pharmacy of the world” and the people of India deserved a better policy. This policy needs to be redrafted seriously after wide consultations with all stakeholders, including patients, he said.

Anant Phadke of the All India Drug Action Network said in the case of generic production (pushed by none other than the Prime Minister) all that needed to be ensured was that the manufacturing process of the generic producer was as good as that of the innovator. “This can mostly be done by meticulous observance of GMP and tested mainly by parameters given in the pharmacopoeia,” he said.

The report of the Ranjit Roy Expert Committee (July 2013), he said, had pointed out that instead of following the strict rules of the United States Federal Drug Authority (USFDA), India should follow the guidelines of Japan’s National Institute of Health Sciences and the WHO, which permitted exemptions for bioequivalence studies in cases of high solubility and low permeability oral-dosage forms, in addition to exemptions to high solubility and high permeability solid oral-dosage forms given by the USFDA.

It is clear that the draft is aimed at securing the interests of industry more than anything else. A policy document, running into all of 18 pages, does not do justice even to the industry. Its sweeping denunciation of the role of PSUs is as worrying as its prescription for the NPPA. Clearly, the DoP seems be to calling the shots, which may not be entirely in the public interest.